Britain's economy may be shrinking again as it continues to be buffeted by the eurozone crisis, the governor of the Bank of England admitted today.

Sir Mervyn King predicted a “long and winding road to recovery” as the Olympics boost fades and millions of households continue to see their incomes squeezed. His grim forecast will inevitably raise fears of a triple-dip recession. Sir Mervyn said that Britain was being dragged down by the sickly eurozone, which was hit today by a wave of strikes.

“The immediate economic outlook remains a challenging one,” he said. “Growth is likely to remain sluggish and inflation above target. The road to recovery will be long and winding.”

The economy grew one per cent between July and September, buoyed by the London Games, and bringing the longest double-dip recession since the Fifties to an end. But Sir Mervyn warned: “Output growth is likely to fall back sharply in the fourth quarter as the boost from the Olympics is reversed — indeed output may shrink a little this quarter.”

But the governor insisted that there were still “good reasons” to believe that Britain was heading in the right direction, with figures today showing unemployment falling.

The Bank of England downgraded its growth forecast for next year to around one per cent. It also predicted that inflation would only fall back in the second half of 2013 and towards the two per cent target in 2014.

This means that the squeeze on many household incomes will continue, certainly into the start of next year, with only small wage rises.

The bleak outlook in the Bank’s inflation report came as workers walked out in Spain, Greece, Portugal and Italy. Protests were also being held in Belgium, Germany, France and some eastern EU states.

The strike action caused misery for thousands of air passengers in Britain. Heathrow said 39 flights — nearly all to or from Spain or Portugal — had been cancelled. Ten in and out of Gatwick were also axed.

Eurostar advised train customers not to travel and warned of disruption throughout the day. The 10.57am London to Brussels service was cancelled, with the company hoping to put passengers on the 12.57pm service.